Appendix 20: Innovation Strategy

Appendix 20: Innovation Strategy

RIIO-ED2 Business Plan 2023 ¨C 2028

2 | RIIO-ED2 Business Plan 2023 ¨C 2028

1.

FOREWORD

3

2.

BUILDING ON STRONG FOUNDATIONS

4

2.1 Our innovation journey

4

2.2

Innovation as part of the corporate vision

6

2.3

How we have evolved our approach to innovation

10

2.4

Our innovation track record

14

3

STAKEHOLDER ENGAGEMENT TO SHAPE OUR RIIO-ED2 STRATEGY

15

3.1

Our range of stakeholders

15

3.2

Engaging with stakeholders to develop our strategy

15

4

OUR INNOVATION STRATEGY FOR RIIO-ED2

21

4.1

How our role in innovation is changing

21

4.2

Our focus for innovation in RIIO-ED2

23

4.3

Our strategic pillars

29

4.4

Innovation embedded in our business plan

32

5

HOW WE INNOVATE TO MEET OUR CUSTOMERS NEEDS

33

5.1

How we innovate

33

5.2

Innovation delivery lifecycle

34

5.3

Idea generation - sourcing innovation ideas

35

5.4

Idea Review

36

5.5

Transitioning innovation to Business As Usual

38

5.6

Reporting and benefits realisation

39

5.7

Bringing third parties in

42

5.8

Fast following others

42

6

Annexe

44

6.1

Innovation as part of our day-to-day business

44

6.2

RIIO-ED1 smart solutions

45

6.3

RIIO-ED2 stakeholder engagement Line of sight

50

6.4

EIC Partnership overview

57

2

3 | RIIO-ED2 Business Plan 2023 ¨C 2028

Since 2014 we have been publishing our Innovation Strategy, setting out our focus for innovation, our approach, and how we

are responding to the feedback we are receiving from stakeholders. Innovation is part of our DNA, and is fundamental to

how we operate, all the way from our CEO to our front-line staff. Innovation is a driving force behind our performance,

ensuring that we are and will continue to be the safest, most reliable and cost-efficient network operator in the UK. We have

been on a continuous journey of learning and growth and have built an industry-leading track record of successfully

undertaking and delivering innovation projects which deliver benefits to our organisation and customers - ?284m from 50

solutions.

The challenge ahead of us in the coming decade is to play our part in facilitating Net Zero and achieving the UK¡¯s legally

binding emissions reduction target by 2050. This is fundamentally a whole society challenge, and the energy industry will

need to play a key role in enabling change across society. It is driving us to innovate more! Our stakeholders have told us

we should innovate more to help tackle this challenge so we are increasing our typical annual innovation spend from ?15m

to ?23m, with ?42.5m over RIIO-ED2 allocated to net zero and the energy system transition.

Historically, innovation in networks has focussed on finding new ways to deliver traditional network outputs for customers,

driving efficiencies to reduce bills for the consumer and new ways of working to improve service and performance. Along

with the challenges we face that span the entire industry and beyond we still need to keep innovating to improve our core

business. Our stakeholders agree and we are allocating ?27.5m of funding from our shareholders and ring-fenced within our

totex allowance to continue to optimise our assets and our practices proactively. As our innovation culture has matured and

we have continually demonstrated the return that investing in innovation brings it is an easy shift to reduce our reliance on

innovation funds.

For RIIO-ED2 we will be changing our focus for innovation, adopting industry-wide themes of Net Zero, Flexibility and

Commercial Evolution, Whole Energy System, and Consumer Vulnerability. Led by our stakeholders we have added Data

and Digitalisation as a sixth theme, as evidenced in section 3 of this document.

We will continue to be the most innovative network in the industry. By leveraging our mature innovation culture, processes,

frameworks and experience of deploying innovation into business-as-usual we will deliver more benefits to customers than

we did over five years of RIIO-ED1. Up to 2020/21 we have delivered ?133m totex savings from a total of ?284m benefits.

We have reduced our totex request in this business plan by ?137m, 21% more than the average of the first 5 years of RIIOED1. We will diligently report these benefits using the new Energy Networks Association (ENA) benefits measurement

framework.

We will need to collaborate more widely, working with a wider range of stakeholders, including regional stakeholders and

other network companies, to attract ideas and deliver projects together. We will seek collaborators to bid into the new

Strategic Innovation Fund, we will build on existing relationships including a strategic collaboration with Scottish & Southern

Electricity Networks (SSEN) on faults innovation, a strategic regional collaboration with SGN on whole energy systems, and

continue to support new and small innovators through the Energy Innovation Centre (EIC).

Our refreshed Innovation Strategy comes at a time when the opportunities and the challenges facing electricity distribution

have never been greater. Our strategy sets out why we innovate; how we innovate; our performance so far and our

ambitious plans for the future. This is shaped around how you, our stakeholders, have informed and guided our plans.

We are encouraged by the volume of ideas that come through our innovation pipeline and the vast portfolio of projects that

continue to grow. We welcome your view on the direction we are heading and the challenges we are addressing. Please

continue to get in touch ¨C innovation@ukpowernetworks.co.uk ¨C share with us your ideas, challenge our approach and

continue to hold us to account.

3

4 | RIIO-ED2 Business Plan 2023 ¨C 2028

In this section we detail:

2.1

2.2

2.3

2.4

Our innovation journey in RIIO-ED1

Innovation as part of our corporate vision and culture

How we evolved our approach to innovation

Our innovation track record

2.1 Our innovation journey

Our first innovation strategy was published in 2014, setting out our leading role in respect of innovation for the RIIO-ED1

period. Our vision was clear. We wanted to be the most innovative DNO working on cutting edge projects guided by our

stakeholder needs. From the outset we believed that innovation would play a crucial role in providing us with the flexibility to

respond better, faster and more cost-efficiently to the changing requirements of our customers.

In 2017, we refreshed our innovation strategy to ensure that our priorities were ambitious and to reflect feedback that we had

received from stakeholders trying to engage with us for idea and project development. Alongside this, we improved our own

processes and procedures and undertook a total refresh of the way we innovate at UK Power Networks. We were driven by

our desire to make it easier and more accessible for customers, companies, innovators, and general stakeholder to engage

and collaborate with us.

Our most recent innovation strategy was published in January 2020, at a time when the opportunities and challenges facing

electricity distribution have never been greater. The strategy focused on our ongoing approach to react to customers¡¯ needs

and desire to continue to innovate in order to make our service more reliable, more affordable, easier to connect to, cleaner

and safer.

Following the above changes and our laser sharp focus on outcomes-based innovation, we now have a culture of innovation

embedded throughout our organisation. Our talented, dedicated and highly collaborative innovation team underpin this

culture, and work as one with teams across our organisation and with third parties on projects that deliver practical value and

outcomes for our customers.

We have been on a journey of continuous learning and growth since our first innovation strategy in 2014. Throughout this

journey, we have developed an industry leading track record of successfully undertaking and delivering innovation projects

which deliver savings to our organisation and customers. We believe that our innovation journey to date, guided by our

innovation strategies, has set the foundation, and building blocks to allow us to successfully fund more innovation through

our business-as-usual activities. We now have the opportunity to reduce our reliance on stimulus funding for near term

asset-based innovation, where the benefits accrue to UK Power Networks and our connected customers. The refreshed

Innovation Strategy for RIIO-ED2 as laid out in this document additionally provides us the opportunity to welcome wider

social challenges into the innovation culture such as consumer vulnerability, which will deliver benefits directly to our

communities.

5 | RIIO-ED2 Business Plan 2023 ¨C 2028

Figure 1: Our innovation journey

2014 Innovation Strategy

Our first Innovation strategy was published

in 2014. We wanted to be the most

innovative DNO, working on cutting edge

projects guided by our stakeholder needs.

This strategy set the foundation for the

development of our innovation culture

throughout RIIO-ED1.

2017 Innovation Strategy

In 2017, we refreshed our strategy to improve

the way that we engaged with stakeholders

for ideas and project development.

We also refreshed the way that our

innovation was deployed into business as

usual by setting up a Smart grid team in our

asset management department including

changes to our processes and procedures,

making it easier for our stakeholders to

collaborate with us. Innovation was

embedded to our corporate vision.

2020 Innovation Strategy

We re-defined our innovation focus

areas in response to changing energy

system and customers¡¯ needs. We set

up 3 key innovation pillars: Efficient and

effective; Net Zero Ready; Future

Ready.

At this stage, we had already delivered

?232m savings through innovative

solutions in RIIO-ED1. A culture of

innovation had been developed

throughout our organisation and we

had received 34 industry awards for

innovation.

RIIO-ED2 Innovation Strategy

We are now focussing on collaboration, adopting

the shared ENA network innovation themes as a

base.

We are increasingly taking the risk of asset based

innovation upon our business, and focussing

stimulus funding on wider societal challenges,

demonstrating our maturity in this space.

To further aide consistent transparency of the

benefits innovation delivers to our customers we

co-developed a common benefits measurement

process with the gas and electricity network

operator members of the EIC, including also

measuring Social Return on Investment benefits.

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